This article provides a brief comparison of the latest legal policies on family offices in the major jurisdictions (I. e. Hong Kong, Singapore and the UAE), including establishment requirements, unique advantages and related restrictions, with the aim of providing reference and assistance to ultra-high net worth clients with global asset management needs.
# Foreword
Due to the geopolitical and economic outlook, more and more ultra-high net worth families choose to set up a single family office (“SFO” or “single family office”) in order to meet the needs of family wealth management and inheritance. In recent years, Hong Kong, Singapore and the United Arab Emirates have successively promoted preferential policies in financial investment, taxation, charity and other aspects to ensure the establishment and operation of family offices, and hope to attract global ultra-high net worth families to land in the local family office business. This article provides a brief comparison of the latest legal policies on family offices in the major jurisdictions (I. e. Hong Kong, Singapore and the UAE), including establishment requirements, unique advantages and related restrictions, with the aim of providing reference and assistance to ultra-high net worth clients with global asset management needs.
# Basic development of family offices in major 1. jurisdictions
**1. HONG KONG * *
Since last year, Hong Kong has taken advantage of its location and financial accumulation to actively encourage the development of family office business. According to statistics, in the first half of 2022, Hong Kong will have more than 15,000 ultra-high net worth individuals, ranking first among global cities in number. [1] On March 24, 2023, the Hong Kong Special Administrative Region Government issued the “Policy Declaration on the Development of Family Office Business in Hong Kong”, encouraging and supporting family businesses to establish family offices in Hong Kong, and providing corresponding policy guidelines and support measures on family business governance, wealth management and inheritance. [2] On 19 May 2023, the Hong Kong Government formally passed the Inland Revenue (Amendment) (Tax Concessions for Family Investment Control Vehicles) Ordinance 2023 (the “Amendment Ordinance”) to further provide special tax incentives for SFOs (see the comparative table below for details). [3]
Since the relevant tax and financial preferential policies of Hong Kong family offices have only been officially implemented this year, compared with Singapore, the Hong Kong government still needs some time to accumulate the first batch of high-quality family offices in Hong Kong. However, according to our practical experience and the observation of professional service organizations in the field of private wealth, Hong Kong’s family office policy has considerable attraction and development potential for many ultra-high net worth clients from mainland China, in particular, its developed financial system, good investment environment and legal environment have attracted many ultra-high net worth customers to turn their attention to Hong Kong and start application preparations.
**2. Singapore * *
At the end of 2021, according to the Monetary Authority of Singapore (“MAS”), there were more than 700 SFOs in Singapore. However, only one year later, by the end of 2022, the number of SFO’s established has increased significantly by more than 1,400, of which more than 1,100 SFO have received relevant tax benefits. [4] SFO applications are expected to maintain a strong growth trend in 2023.
In order to attract ultra-high net worth individuals to settle in Singapore, in fact, the Global Investor Programme (“GIP”) launched by the Singapore government as early as 2004 already included a personalized family office plan. Subsequently, Singapore also introduced tax incentives that allow family investment vehicles to enjoy tax-free treatment on specific types of income from designated investments. According to the regulations, if the fund company meets the conditions, it can apply for the tax exemption schemes under Singapore’s 1947 Income Tax Act, namely the onshore fund tax exemption scheme (13O, formerly 13R) and the enhanced fund tax exemption scheme (13U, formerly 13X). [5] Under the framework of the 13O and 13U plans, eligible gains will be exempt from tax.
On April 11, 2022, MAS issued a new policy on the application requirements for 13O/13U family office planning in Singapore. Taking the application of 13O as an example, the capital threshold at the time of application was raised from S $5 million to S $10 million and to S $20 million in the following year. [6] On July 5, 2023, MAS detailed this policy again at the joint conference of its Annual Report and Sustainable Development Report for Fiscal Year 2022/2023. In the case of 13O, for example, MAS has limited and updated capital size (the minimum capital requirement has been raised to S $20 million and the buffer period has been eliminated), professional investor status (at least one non-family member must act as a professional fund manager), and local operating expenses (increased ladder spending requirements). [7]
In addition, in order to further encourage SFO to invest in charity, the Charity Tax Incentive Scheme (PTIS), which will come into effect on January 1 next year, stipulates that charitable donors with SFO in Singapore can obtain a 100 per cent tax relief for donations through qualified local intermediaries, provided that the donation meets the relevant conditions and the tax deduction is capped at 40 per cent of the donors’ legal income. [8]
In addition to encouraging philanthropic activities, Singapore also encourages the participation of the Home Office in mixed financing structures and climate change-related investments on a global scale.
**3. UAE (Dubai) * *
Compared with Singapore and Hong Kong, the UAE is actually the first country in the world to propose and establish a single family office. However, at that time, only individual free trade zones provided tax incentives for single-family offices, which did not form a prairie fire. On 11 January 2023, Federal Decree No. 37 of 2022 on Family Companies (Enterprises) (“Federal Decree No. 37”) came into force, establishing a comprehensive legal framework for the ownership and family governance of all family businesses established in the UAE and granting special benefits and incentives to family businesses at the federal and emirate levels. Among other measures, family members can set up offshore entities (I. e., FTZ institutions (FZEs) or FTZ companies (FZCOs)) in the FTZ to manage family assets and companies, and allow 100 per cent of the profits earned to flow back to overseas individuals. [9]
At present, the three hottest free zones in Dubai, namely the Dubai International Financial Centre (“DIFC”), the Dubai World Trade Centre (“DWTC”) and the Dubai Multi-Commodities Centre (“DMCC”), are actively cooperating with Federal Decree 37 to introduce preferential policies for single family offices with local characteristics, to attract ultra-high net worth families to invest in the area.
Among them, DIFC is the most popular: by 2021, more than 460 entities in DIFC will adopt family office architecture, accounting for nearly 10% of DIFC enterprises. [10]DIFC took the lead in introducing the relevant provisions of a single family office as early as 2004. [11] On January 31, 2023, DIFC further promulgated the DIFC Family Arrangement Regulations to regulate the operation of family offices,[12] updated the previous family office system, and formulated a more detailed implementation plan for the legal provisions related to family offices and family businesses in Federal Decree No. 37. The regulations allow UAE family offices to operate without being registered with the Dubai Financial Services Authority as a “designated non-financial business or profession. [13] This means that many previously required disclosures (e. g., sources of wealth, holdings, etc.) are not required to be disclosed, further enhancing privacy protections for ultra-high net worth individuals. In addition, on March 1, 2023, DIFC officially launched the world’s first family business and private wealth center. [14]
With geopolitical changes and the UAE’s strong support for a single office, more and more ultra-high net worth individuals are turning their investment eyes to the UAE. More than 4,500 global millionaires are expected to flock to Dubai in 2023, with the UAE ranking second in the world in terms of projected attractiveness to ultra-high net worth individuals. [15]
# Minimum establishment threshold and classic framework for 2. major jurisdictions
**1. Hong Kong: HK $0.24 billion**[16]
* * 2. Singapore: Apply for 13O minimum 20 million Singapore dollars and 13U minimum 50 million Singapore dollars * *[17]
**3. UAE: US $50 million**[18]
#3. the latest tax incentives and outstanding advantages in major jurisdictions
**1. Comparison of recent tax benefits * *
**2. Highlight comparative advantages * *
#4. Conclusion
Since the Singapore government has led the trend through family office business, financial centers such as Hong Kong and the United Arab Emirates have followed suit, increasing preferential efforts to attract global talent and capital. Hong Kong, Singapore and the United Arab Emirates have their own advantages as the most popular locations for family offices in the world.
When choosing a family office location, ultra-high net worth individuals should fully consider their own living needs, family wealth management needs, and global business layout and development. But no matter which region is ultimately chosen, setting up a family office will require careful planning and implementation. In the decision-making process, it is recommended to consult professional lawyers, financial/tax consultants, bankers and relevant professionals to consider the whole situation and start with the end, so as to ensure that the establishment and operation of the family office can meet the requirements of local regulations and policies, and can enjoy the corresponding preferential treatment and convenience to the maximum extent, so as to achieve the ultimate goal of global wealth management.
[Note]]
[1] See Legislative Council Brief on Inland Revenue (Amendment) (Tax Concessions for Family Investment Control Vehicles) Ordinance 2022, https://www.legco.gov.hk/yr2022/chinese/brief/asst3182c_20221207-c.pdf 。
[2] See Policy Statement on the Development of Family Office Business in Hong Kong, https://www.info.gov.hk/gia/general/202303/24/P2023032300716.htm 。
[3] See Inland Revenue (Amendment) (Tax Concessions on Family Investment Control Vehicles) Regulations 2023, https://www.elegislation.gov.hk/egazettedownload?EGAZETTE_PDF_ID=31497 。
[4] See Singapore New Single Family Office Tax Incentives,Caproasia, 5 July 2023, https:// www/.
[5] See Singapore’s Income Tax Act 1947, https://sso.agc.gov.sg/act/ita1947?ProvIds=P14-#pr13O -。
[6] See Singapore: Changes to family office tax incentive regimes,KPMG, 11 May 2022, https:// kpmg.com/us/en/home/insights/2022/05/tnf-singapore-changes-to-family-office-tax-incentive-regimes.html.
[7] See Ravi Menon,Remarks on the MAS Annual Report and MAS Sustainability Report 2022/2023,BIS, 6 July 2023, https:// www.
[8] See The Charity Tax Benefit Scheme, https://www.mas.gov.sg/schemes-and-initiatives/philanthropy-tax-incentive-scheme-for-family-offices 。
[9] See Federal Decree No. 37 of 2022 on Family Companies (Enterprises), version examined of https://www.moec.gov. AE /documents/20121/0/family company english and correcetd.pdf/? t = 1674115232919.
[10] See Sarmad Khan,Dubai Enacts New Rules For Ultra-Wealthy And Family Businesses Operations,The National, 9 February 2023, https:// www/.
[11] See DIFC to Become Hub for Family Offices New regulations encourage Family Offices to the DIFC,17 June 2018, https:// difc-become-hub-family-offices-new-regulations-encourage-family-offices-difc/.
[12] See DIFC Regulations on Family Arrangements, https://www.difc. AE /application/files/9516/8249/3738/Family_Arrangements_Regulations_Updated_April23.pdf 。
[13] See The New IFC Family Arrangements Regulations, PWC, 06 April 2023, https:// www.
[14] See, https://www.mediaoffice. AE /en/news/2023/March/01-03/difc-famwealth 。
[15] See note [10] above.
[16] See note [3] above.
[17] See note [7] above.
[18] See note [12] above.
(Source: Zhonglun Vision)
